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2014 (8) TMI 358 - AT - CustomsImport against transferable duty free import authorization (DFIA) - fulfillment of conditions - import of Patchouli Oil by the appellant being a bona fide transferee - Notification No. 98/2009-Cus. dated 11.9.2009 - Whether Patchauli Oil is capable of being used in food industry in Assorted Confectionery - Held that - in case of transferable license the nexus between the imported material and export product is not required to be proved afresh by the transferee/importer, once the imported material is otherwise covered by the advance license - In view of this authoritative judicial pronouncement the department cannot now loosely interpret the provisions under scheme by reading several contrasting instructions issued from time to time - Decision in the case of Hico Enterprises 2008 (4) TMI 117 - SUPREME COURT followed. Merely because in the instant case, licenses are not transferable, it does not mean that the customs authorities are permitted to go beyond the license to deny exemption benefits. In the instant case, the specifications of the goods imported are squarely covered by the advance license issued by the licensing authority. The appellant has thus established a nexus as envisaged by the advance licensing scheme. The License Amendment Sheet dated 23.11.2011 (at page 24) at Sr. no. 4 mentions the modified Import Item as Essential Oils without any further restriction as to its description or classification. Patchouli Oil being admittedly covered under the scope of the permissible input Essential Oil mentioned in the transferrable DFIA, the appellant is entitled for duty exemption under Notification No. 98/2009-Cus.dated 11.9.2009, without insisting on specifications, being a transferee of DFIA - Decided in favour of assessee.
Issues Involved:
1. Eligibility for duty exemption for Patchouli Oil under DFIA. 2. Requirement for correlation of technical specifications with the export product. 3. Applicability of Public Notice No. 35 (RE-2013)/2009-14 dated 31.10.2013. 4. Retrospective application of policy amendments. 5. Establishment of nexus between imported inputs and export products. Issue-wise Detailed Analysis: 1. Eligibility for Duty Exemption for Patchouli Oil under DFIA: The core issue in this appeal concerns the eligibility for duty exemption for Patchouli Oil imported by the appellant under a transferable duty-free import authorization (DFIA) dated 16.06.2011, in terms of Notification No. 98/2009-Cus dated 11.9.2009. The DFIA was issued based on SION E-1 for Assorted Confectionary. The appellant, being a bona fide transferee, sought duty-free clearance of Patchouli Oil, which is listed as a permissible input under 'natural essential oils' in the DFIA. The fact that Patchouli Oil is an essential oil was undisputed, but the duty-free clearance was denied by the authorities. 2. Requirement for Correlation of Technical Specifications with the Export Product: The Deputy Commissioner of Customs sought clarifications regarding the correlation of technical specifications with the export product. The appellant explained that Patchouli Oil is a well-known food flavor used in various food products, including assorted confectionary items. The DFIA did not stipulate any condition against the input item 'Essential Oils' to exclude Patchouli Oil. The appellant argued that the mandate to correlate specifications is applicable only when the resultant product is specified in the sensitive list, which was not the case for confectionary. 3. Applicability of Public Notice No. 35 (RE-2013)/2009-14 dated 31.10.2013: The lower authorities rejected the exemption claim based on Public Notice No. 35, which required the importer to furnish an undertaking to confirm the actual use of Patchouli Oil in the export product. The appellant contended that the public notice was not applicable since the DFIA in question was issued before the notification date of 01.08.2013. The Tribunal agreed, stating that the public notice could not retrospectively apply to DFIAs issued prior to the amendment. 4. Retrospective Application of Policy Amendments: The Tribunal held that policy amendments could not have retrospective effect, as established by the Hon'ble Supreme Court in Union of India vs. Asian Food Industries and Soubhik Exports Ltd. The right to import inputs without establishing actual use in the resultant product, which accrued on the date of issue of the DFIA, remains protected. The Tribunal emphasized that by issuing a circular, a new condition restricting the scope of the exemption could not be imposed. 5. Establishment of Nexus Between Imported Inputs and Export Products: The Tribunal reiterated that in cases of transferable licenses, the nexus between the imported material and the export product is not required to be proved afresh by the transferee/importer. The appellant was not required to establish that Patchouli Oil was actually used in the manufacture of the exported confectionery. The Tribunal cited multiple precedents, including the Hon'ble Supreme Court's judgment in CC (Imports), Mumbai v. Hico Enterprises, which held that the customs department could not compel the transferee to prove that the export obligation had been fulfilled by the original license holder. Conclusion: The Tribunal allowed the appeal, directing the respondent to assess the Bill of Entry as per the directions recorded, within seven days. The Tribunal concluded that Patchouli Oil, being covered under the permissible input 'Essential Oil' in the DFIA, was eligible for duty exemption under Notification No. 98/2009-Cus dated 11.9.2009, without insisting on specifications from the transferee of DFIA. The appeal was allowed with consequential relief, and the stay petitions were disposed of accordingly.
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